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For teaching purposes, this is the commentary-only version of the HBR case study. The case-only version is reprint R0503X. The complete case study and commentary is reprint R0503A.

Customer Strategy Solutions, a California-based developer of order fulfillment systems, is facing a shakedown. Six months after the firm's CEO, Pavlo Zhuk, set up a software development center in Kiev, local bureaucrats say the company hasn't filed all the tax schedules it should have. Moreover, Ukrainian tax officials claim that the company owes the government tax arrears. Zhuk is shocked; he and his colleagues have done everything by the book. This isn't the first time Zhuk has encountered trouble in Ukraine. In the process of getting the development center up and running, a state-owned telecommunications utility had made it difficult for Zhuk to get the phone lines his company needed. Senior telecom manager Vasyl Feodorovych Mylofienko had told Zhuk it would take three years to install the lines in his office--but for a certain price, Mylofienko had added, the lines could be functioning the following week. Even as the picture of rampant bribery and corruption in Ukraine becomes clear, Zhuk still doesn't want to pull out. Of Ukrainian descent, he has dreams of helping to modernize the country. By paying his programmers more than they could make at any local company, he hopes to raise their standard of living. And yet, he isn't sure he can keep compromising his principles for the sake of the greater good. Should Customer Strategy Solutions pay off the Ukrainian tax officials?

Commenting on this fictional case study in R0503A and R0503Z are Alan L. Boeckmann, the chairman and CEO of Fluor Corp.; Rafael Di Tella, a professor at Harvard Business School; Thomas W. Dunfee, the Kolodny Professor of Social Responsibility and a professor of legal studies at Wharton; and Bozidar Djelic, the former finance and economy minister of Serbia.

learning objective:

This case shows an American entrepreneur wondering whether to pay apparent extortionists in Ukraine, where he founded an enterprise. The reader discovers ideas for assessing developing countries' business practices before investing and for fighting bribery and corruption in overseas nations. The reader also considers the consequences of paying bribes.

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THIS HBR CASE STUDY INCLUDES BOTH THE CASE AND THE COMMENTARY. FOR TEACHING PURPOSES, THE REPRINT IS ALSO AVAILABLE IN TWO OTHER VERSIONS: CASE STUDY ONLY, REPRINT R0503X, AND COMMENTARY ONLY, REPRINT R0503Z.

Customer Strategy Solutions, a California-based developer of order fulfillment systems, is facing a shakedown. Six months after the firm's CEO, Pavlo Zhuk, set up a software development center in Kiev, local bureaucrats say the company hasn't filed all the tax schedules it should have. Moreover, Ukrainian tax officials claim that the company owes the government tax arrears. Zhuk is shocked; he and his colleagues have done everything by the book. This isn't the first time Zhuk has encountered trouble in Ukraine. In the process of getting the development center up and running, a state-owned telecommunications utility had made it difficult for Zhuk to get the phone lines his company needed. Senior telecom manager Vasyl Feodorovych Mylofienko had told Zhuk it would take three years to install the lines in his office--but for a certain price, Mylofienko had added, the lines could be functioning the following week. Even as the picture of rampant bribery and corruption in Ukraine becomes clear, Zhuk still doesn't want to pull out. Of Ukrainian descent, he has dreams of helping to modernize the country. By paying his programmers more than they could make at any local company, he hopes to raise their standard of living. And yet, he isn't sure he can keep compromising his principles for the sake of the greater good. Should Customer Strategy Solutions pay off the Ukrainian tax officials?

Commenting on this fictional case study in R0503A and R0503Z are Alan L. Boeckmann, the chairman and CEO of Fluor Corp.; Rafael Di Tella, a professor at Harvard Business School; Thomas W. Dunfee, the Kolodny Professor of Social Responsibility and a professor of legal studies at Wharton; and Bozidar Djelic, the former finance and economy minister of Serbia.

learning objective:

This case shows an American entrepreneur wondering whether to pay apparent extortionists in Ukraine, where he founded an enterprise. The reader discovers ideas for assessing developing countries' business practices before investing and for fighting bribery and corruption in overseas nations. The reader also considers the consequences of paying bribes.

Publication Date:

Discipline:

Source:

Product number:

Length:

Also Available in:

description

For teaching purposes, this is the case-only version of the HBR case study. The commentary-only version is reprint R0503Z. The complete case study and commentary is reprint R0503A.

Customer Strategy Solutions, a California-based developer of order fulfillment systems, is facing a shakedown. Six months after the firm's CEO, Pavlo Zhuk, set up a software development center in Kiev, local bureaucrats say the company hasn't filed all the tax schedules it should have. Moreover, Ukrainian tax officials claim that the company owes the government tax arrears. Zhuk is shocked; he and his colleagues have done everything by the book. This isn't the first time Zhuk has encountered trouble in Ukraine. In the process of getting the development center up and running, a state-owned telecommunications utility had made it difficult for Zhuk to get the phone lines his company needed. Senior telecom manager Vasyl Feodorovych Mylofienko had told Zhuk it would take three years to install the lines in his office--but for a certain price, Mylofienko had added, the lines could be functioning the following week. Even as the picture of rampant bribery and corruption in Ukraine becomes clear, Zhuk still doesn't want to pull out. Of Ukrainian descent, he has dreams of helping to modernize the country. By paying his programmers more than they could make at any local company, he hopes to raise their standard of living. And yet, he isn't sure he can keep compromising his principles for the sake of the greater good. Should Customer Strategy Solutions pay off the Ukrainian tax officials?

Commenting on this fictional case study in R0503A and R0503Z are Alan L. Boeckmann, the chairman and CEO of Fluor Corp.; Rafael Di Tella, a professor at Harvard Business School; Thomas W. Dunfee, the Kolodny Professor of Social Responsibility and a professor of legal studies at Wharton; and Bozidar Djelic, the former finance and economy minister of Serbia.

learning objective:

This case shows an American entrepreneur wondering whether to pay apparent extortionists in Ukraine, where he founded an enterprise. The reader discovers ideas for assessing developing countries' business practices before investing and for fighting bribery and corruption in overseas nations. The reader also considers the consequences of paying bribes.

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